photo by shamshahrin
Articles like this scare the hell out of me. Malaysia has a growing issue on it’s hands in part because the government is still saying, “No problemo“. Unless there are genius’ at work the likes of no where else in the World, Malaysia has some painful realizations to come to grips with over the next few months.
Where the discussion isn’t going, at least in public, (or the PR level), is the possibility that the first foreign policy crisis the administration will face will be the complete economic collapse of a large, unstable nation. To be sure, Pakistan is nearly broke, and U.S. policy makers seem to be aware of that; but a worldwide demand crisis could lead to social unrest in countries like Indonesia and Malaysia, Singapore, the Ukraine, Japan, Turkey or Egypt (which is facing an internal political crisis of epic proportions already). The U.S. won’t have the resources to, say, engineer the rescue of the peso again, or intervene in Asia as in 1997.
A close friend of mine organizing funding for a mobile device startup recently had dinner with banker here and told him that many manufacturers in the country have cut back to 2 days of operation. The next shoe to drop locally is massive defaulting on credit and car loans according to this banker.
Malaysia and other countries facing a financial crisis need to rewrite home and auto loans based on current valuation rather than going into the same default and foreclosure spiral as the US and Europe. A link house in Bandar Sri Damansara was 285k RM in 2002. Earlier this year the same property was asking 520K RM. I anticipate correction in the area of 30 to 40% over the next year. Basically if your property doubled in value over the last few years, get ready for a big correction.
Malaysia has been lucky to have experienced good times for a long while. I’m scared what the reaction would be here if people are holding property loans at twice the amount of the homes current value. Then consider a collapse in the job market along with b.a.d. inflation. Then add government with weak leadership that continues to deny there is a problem.
Scary times folks.
Popularity: 12% [?]